Three-way matching: how to check an invoice before you pay it
In short
Compare the supplier invoice with the purchase order and the delivery record before you pay, because that catches overbilling, short deliveries and price creep. Hold any invoice that disagrees until the supplier or your own team fixes the document that is wrong.
- A three-way match compares the purchase order, the delivery record and the supplier invoice before payment.
- Each document catches a different error: overbilling, short deliveries or price creep.
- Set a written tolerance so rounding differences do not stall payments.
- Hold any mismatched invoice until you have a corrected invoice, confirmed delivery, amended PO or credit note.
- Keep the three documents linked so audits and disputes can be traced quickly.
Paying a supplier invoice without checking it against what you ordered and what arrived is how overbilling, short deliveries and price creep slip through. This guide shows how to run a three-way match step by step and resolve mismatches.
A three-way match compares the supplier invoice, the purchase order and the goods received note (the record of what actually arrived) before you approve payment. The purchase order says what you agreed to buy and at what price, the delivery record says what turned up, and the invoice says what the supplier wants paid. When they agree, you pay. When they disagree, you hold the invoice, find out which document is wrong, and pay only for what was ordered, delivered and priced as agreed.
The check is simple, but it only works if you run it every time and know what to do with a mismatch. This guide walks through both.
What each document proves
Each document answers a different question, and no single one can answer all three.
The purchase order is your own record of the commitment. It lists the items, quantities, agreed unit prices and delivery terms. It is the baseline everything else is measured against. If it is vague or missing, the match has nothing to hold on to. You can raise and track these in purchase orders.
The goods received note is proof of delivery. It records what was counted in, on what date and in what condition. In many small businesses this is a signed delivery note or a receiving entry made by whoever unpacked the boxes. For services, it is the sign-off that the work was done. Keeping that record is the job of delivery notes.
The supplier invoice is the supplier's claim for payment. It is the only one of the three that you did not write yourself, which is why it gets checked against the other two. See supplier invoices for how these are captured and approved.
The three problems a match catches
Most invoice errors fall into three groups, and each one is caught by comparing a different pair of documents.
- Overbilling: the invoice quantity is higher than the quantity on the delivery record. Example: an invoice for 100 laptops at $1,000 each when only 80 were delivered is a $20,000 overcharge, and the receipt is the only thing that exposes it.
- Short deliveries: the purchase order says 500, 420 arrived, and the supplier invoices for the full 500, or invoices correctly for 420 while the remaining 80 never come.
- Price creep: the invoice unit price is higher than the PO price. It might be an honest list price update or an unauthorized increase, but either way someone with authority should decide before you pay.
Partial shipments are a common source of mismatches that are not errors at all, so treat them as normal and plan for them.
How to run the check
Confirm there is a purchase order
Find the PO number on the invoice. If there is none, or it does not match one of your orders, stop. An invoice without an order behind it goes to whoever has authority to say whether the purchase was legitimate.
Check the supplier and the basics
Confirm the supplier name, the invoice number (to avoid paying the same invoice twice), the currency and the payment terms against the purchase order and your supplier record.
Match quantities to the delivery record
For each line, compare the invoiced quantity with the quantity received. The invoice should never exceed what was received. If it invoices for less than the PO because the order was delivered in parts, that is fine as long as it matches that delivery.
Match unit prices to the purchase order
Compare each invoiced unit price with the PO price. Then check the extras: freight, setup charges, fuel surcharges and tax. Anything on the invoice that is not on the PO needs an explanation.
Check the totals and the dates
Recalculate the line totals and the invoice total. Confirm the delivery date falls within the PO terms and that the payment due date follows the agreed terms, not the date you happened to open the email.
Set a tolerance for small differences
Decide in advance what counts as a match. A rounding difference of a few cents should not stall a payment. A common approach is a small fixed amount or a small percentage per line, with anything above it going to a named approver. Write the limit down so every person applies it the same way.
Hold and resolve any mismatch
Mark the invoice as on hold so nobody pays it by accident. Contact the supplier, or your own buyer or receiving team, to find out which document is wrong. Then approve payment only after you have a corrected invoice, a confirmed delivery, an amended PO or a credit note.
Approve, pay and file the three documents together
Once everything agrees, approve the invoice and release payment. Keep the PO, delivery record and invoice linked so that an audit, a dispute or a repeat order can be traced in one place.
What to do when the documents disagree
The fix depends on which document is wrong, so decide that before you call anyone.
- Invoice quantity is above the delivery record: ask the supplier for a corrected invoice or proof of delivery. Do not pay the difference. Check your own receiving record first in case goods arrived and were not logged.
- Invoice quantity is below the PO and the delivery record agrees: this is a partial delivery. Pay the part delivered and keep the PO open for the balance.
- Invoice price is above the PO price: ask the buyer whether a price change was agreed. If it was, amend the PO so the record is accurate. If not, ask for a credit note or a corrected invoice.
- Goods arrived but there is no PO: raise the PO retrospectively only if the purchase was approved, and treat the gap as a process problem to fix.
- Goods were damaged or rejected: the delivery record should say so. Pay only for accepted goods, and ask for a credit note for the rest.
Fix the source
If the same supplier mismatches repeatedly, the cause is usually a stale price list or a vague PO. Update the supplier record rather than clearing the same exception every month.
Where the check pays for itself
The check matters most where the same supplier invoices you often, where orders are delivered in several parts, or where prices move between order and delivery. It matters least for small, low-risk purchases, where a two-way match of invoice against PO, or a simple approval, may be enough. Many businesses apply a value threshold: below it, a lighter check; above it, the full three-way match.
Do not match from memory
Approving an invoice because the delivery "felt about right" defeats the control. The match only protects you if the quantity comes from a record made at the time of delivery.
The habit worth building is small. Every invoice meets its purchase order and its delivery record before it meets your bank account. Each mismatch you catch is money kept, and each one you trace back to its source makes the next one less likely.
Sources
- What Is 3-way Matching in Accounts Payable?Ramp · accessed 2026-10-22
- 3 Way Match in Accounts Payable: Process and Common ErrorsSourceday · accessed 2026-10-22